LONDON — To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.
To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per annum since January 2008.
Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators and buy at prices that offer decent value.
With the shares at 3413p, Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO)’s market cap. is £48,180 million.
This table summarises the firm’s recent financial record:
|Year to December||2008||2009||2010||2011||2012|
|Net cash from operations ($m)||14,883||9,212||18,277||20,030||9,368|
|Adjusted earnings per share (cents)||656.2||357.1||713.3||808.5||503.1|
|Dividend per share (cents)||112.35||45||108||145||167|
2012 was a challenging year for Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO), which finds, mines, and processes mineral resources. Despite underlying earnings of $9.3 billion, the firm posted $14.4 billion in writedowns that led to it taking a headline net loss of $3.0 billion. The company’s major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, iron ore, gold, and industrial minerals like borax, titanium dioxide and salt. Activities span the world and the firm has a significant presence in Australia, North America, Asia, Europe, Africa and South America.
The twin effects of softening commodity prices and rising costs, particularly in its aluminium and energy businesses, caused Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO) problems and led to the loss. However, in recent news, there has been change at the top with a new CEO and a new CFO, both highly financially incentivised positions. In words that will sound like music to investors, Sam Walsh, the incoming CEO, said that under his leadership Rio Tinto plc (ADR) (NYSE:RIO) (LSE:RIO) would have, “… an unrelenting focus on pursuing greater value for shareholders. To do this we need to run the business as owners not managers and my immediate priority is to build more focus, discipline and accountability throughout the organisation.”